(Adds details, analyst comments, updates markets)
* Housing starts increase 9.7 percent in January
* Building permits rise 7.4 percent
* Single-family starts jump 3.7 percent
* Import prices surge 1.0 percent in January
By Lucia Mutikani
WASHINGTON, Feb 16 (Reuters) - U.S. homebuilding rose to more than a one-year high in January, boosted by strong increases in the construction of both single- and multi-family housing units, and further gains are likely with building permits surging to their highest level since 2007.
Other data on Friday showed a jump in import prices last month amid solid increases in the costs of petroleum and a range of other goods, bolstering expectations that inflation will accelerate this year. The bullish housing data suggested the economy remained on firmer footing at the start of the year despite weak retail sales and industrial production in January.
"The economy is back on a winning path for stronger growth even if it is not firing on all cylinders with all sectors participating," said Chris Rupkey, chief economist at MUFG in New York.
Housing starts jumped 9.7 percent to a seasonally adjusted annual rate of 1.326 million units, the Commerce Department said. That was the highest level since October 2016 and followed an upwardly revised sales pace of 1.209 million units.
Economists polled by Reuters had forecast housing starts rising to a pace of 1.234 million units last month after a previously reported rate of 1.192 million units.
Building permits surged 7.4 percent to a rate of 1.396 million units in January, the highest level since June 2007.
A tightening labor market is boosting demand for housing, but rising mortgage rates and house prices could slow the momentum. Despite the unemployment rate being at a 17-year low of 4.1 percent, annual wage growth has not exceeded 3 percent.
In contrast, the annual house price increase topped 6 percent in November. The 30-year fixed mortgage rate rose to an average of 4.38 percent this week, the highest level since April 2014, from 4.32 percent in the prior week, according to mortgage finance agency Freddie Mac.
Mortgage rates are rising in tandem with U.S. government bond yields on worries about rising inflation.
The inflation concerns were underscored by a separate report from the Labor Department on Friday showing import prices jumping 1.0 percent in January after gaining 0.2 percent in December. In the 12 months through January, import prices rose 3.6 percent, the largest advance since April 2017, quickening from a 3.2 percent increase in the 12 months through December.
While prices of imports from China were unchanged for a second straight month, they increased on a year-on-year basis for the first time since October 2014.
"Going forward, we expect higher import prices to feed through to firming producer and consumer prices domestically," said Gregory Daco, chief U.S. economist at Oxford Economics in New York.
Data this week showed an acceleration in consumer and producer prices in January, which boosted expectations inflation will rise this year and potentially breach the Federal Reserve's 2 percent target.
Inflation is expected to be driven by a tightening labor market, a weak dollar and fiscal stimulus in the form of a $1.5 trillion U.S. tax cut package and increased government spending.
Higher inflation could prompt the Fed to be a bit more aggressive in raising interest rates this year than is currently anticipated. The U.S. central bank has forecast three rate increases for this year, with the first hike expected in March.
A survey from the University of Michigan on Friday showed consumers' inflation expectations unchanged in early February.
The PHLX housing index was trading 0.6 percent higher on Friday, in line with a broadly firmer U.S. stock market. Shares of D.R. Horton, the nation's largest homebuilder, rose 0.8 percent while those of Lennar Corp fell 0.2 percent.
The dollar rebounded from a three-year low against a basket of currencies. Prices of U.S. Treasuries were mostly trading higher as investors bought back bonds after a selloff earlier in the week.
Single-family homebuilding, which accounts for the largest share of the housing market, increased 3.7 percent to a rate of 877,000 units in January. Single-family home construction rose in the South and Northeast, but fell in the Midwest and West.
Permits to build single-family homes fell 1.7 percent in January, but the drop could be temporary. A survey on Thursday showed confidence among homebuilders hovering at lofty levels in February. Builders expected an increase in sales over the next six months.
Single-family home completions increased 2.2 percent to 850,000 units last month, the highest level since June 2008. While that rise will help to alleviate an acute shortage of houses on the market, single-family completions are half of what they were during the housing market boom in 2006.
"Builders have ramped up construction of single-family homes and completions should rise going into the spring selling season," said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
Starts for the volatile multi-family housing segment surged 23.7 percent to a rate of 449,000 units in January. Groundbreaking on multi-family housing projects with five units or more rose to its highest level since December 2016. Permits for the construction of multi-family homes soared 26.5 percent. (Reporting by Lucia Mutikani; Editing by Paul Simao)